You have located a multifamily property in your preferred market. The building actually fits all of your conditions yet the property’s cash-flow is not what you’d like it to be. So, should you look for another apartment building?
Many new investors overlook ways they may be able to improve the cashflow of the property. Listed below are some of those ways.
1. Increase the Rents
This is pretty clear but there are cases where the rents have not increased for a long time. If the rents are below market, you may be able to increase their rents. Analyze your rents by asking your tenants, calling on other for rent signs in similar areas or using Rentometer. Keep in mind, if you’re in a city or county that has rent controls, the choice to do this may not be available.
2. Add Income from other sources
If the building is located on a highly trafficked street selling advertising space may somewhere on the property may be an option to add a new rental stream. Always check your local zoning ordinances to confirm this is viable.
3. Reduce Expenses
Take advantage and apply for utility rebates when you upgrade the older inefficient toilets, shower heads and common area lighting to more modern standards.
4. Upgrade Unit Interiors
Upgrading kitchens and bathrooms can be a simple way to receive rent increases once you have a vacancy. Pull out old carpeting and install longer lasting faux hardwood or tile flooring, new cabinet exteriors, fresh paint and carpeting in bedroom areas, new vanities, newer appliances if necessary, and modern energy efficient lighting fixtures.
5. Washers and Dryers
The most desired amenity added to rental leases are washers and dryers. If you can install washer and dryer hookups and tenants pay for their own water, this could add about $50-90 per month to your income per unit.
For building with a common utility room, just install a new washer and dryer. Suppose each unit does two loads of laundry every week. Your washer and dryer each costs $1.25. That comes out to $5 each week or $260 annually.
For 10 units, that works out to $50 per week or $2,600 per year.
With the increased income, the value of the property has also increased depending on the cap rate.
6. Pet friendly units
Sure pets can lead to damage, smells, and urine and the carpet will likely need to be changed once the tenant vacates. Include a pet addendum to the lease agreement that they are responsible for cleaning the unit’s interior and immediate exterior area free of pet waste, hairs, food, accessories and cages.
MOST apartment buildings don’t allow pets. So, if you are allowing them a place for their furry friends, your building could have high demand. The reason is tenants who have pets are usually willing to pay more to have their pets live with them. This can be an additional $75-100 a month. Moreover, you can collect a $150-$250 non-refundable pet fee per animal upon move-in.
7. Garage parking or storage
Tenants can and do pay more to park their cars or have additional storage space in a garage. An additional charge for garage space is typical and can make it well worth the expense or removing any personal supplies to boost the monthly income. A covered carport is another option.
If you paid a lot less for the building that a previous investor 10 years ago, apply for re-assessment to reduce your taxes. Why do this? Your current taxes may be based on prices from 10 years ago or more.
9. Renter’s Insurance
In more and more instances, we’ve noticed property management companies requiring tenants to have renter’s insurance. Even some self-storage facilities require this nowadays. Because the property owner’s insurance policy doesn’t cover the tenant’s personal items, tenants may be required to get this coverage by the owner.
The cost may only be $12 a month. However, the owner-operator can charge $17 per month for each tenant unless they have a separate policy. It is only $5 extra each month but if the building has 24 units and 4 residents have their own policy, that means 20 tenants will pay you an extra $5 per month or $1200 per year.
10. Short-term Lease options
Some prospective tenants inquire about renting for a short-term ranging from three to six months. Perhaps they need an interim place are searching for a home to buy or relocated for a temporary work assignment and need it for a short time. You can charge a premium for the convenience.
11. Lease with Built-in increase
In your lease, you can insert a built-in rent increase of 3-5% upon renewal. This ensures your rents are always priced to the market, and it is a hedge against inflation.